The Landed Cost of Imported Garments: A Worked Calculation

Landed cost is the cost of a garment at the buyer's receiving point. Start with the agreed supplier price, then add every charge needed to move, clear, receive and put the goods away. It is the number that a merchandising team needs for margin planning, even when the supplier quote is expressed on a different basis.

The useful question is not whether one FOB quote is lower than another. It is whether the two garments will arrive with the same product specification, service level and delivered cost. Freight, consolidation, insurance, clearance, brokerage, delivery and receiving work can all change the answer. Some charges sit against a shipment, some against an entry, and some are per garment only after allocation.

This guide gives a practical model for an imported-garment order. It does not publish duty rates, tariff percentages or transit promises, because those inputs change and must be confirmed for the live shipment. Use the model to expose assumptions, then have the buyer's customs and logistics advisers validate the current figures.

What does landed cost include for imported garments?

Landed cost includes the product price plus the cost to bring the goods to the agreed receiving point. In a basic FOB-based model, the supplier's FOB price is only the first line. Add international transport, cargo cover where used, import charges, clearance costs, destination transport and receiving-related charges that the buyer needs to recover.

The exact stack depends on the sale term, destination, shipment method and commercial arrangement. A full container shipment may spread port and brokerage costs across many units. A small consolidated shipment may carry a very different allocation. The model should therefore retain the shipment-level total as well as the per-unit result.

Cost group	What belongs in it	How to record it
Product	Agreed unit price, approved allowances and any supplier-side charges included in the quote	Per unit and total order value
Origin movement	Collection, consolidation, export handling or documentation where outside the quote	Shipment total, then allocated
International movement	Ocean or air freight, fuel-related charges and cargo cover where purchased	Shipment total, then allocated
Import and clearance	Duty, tax where unrecoverable, broker charges, examinations or other entry charges	Entry total and per unit
Destination movement	Port release, drayage, delivery appointment and warehouse delivery	Shipment total, then allocated
Receiving	Unloading, handling, relabelling, storage or put-away where relevant	Per unit or shipment total

Keep recoverable taxes separate from the commercial landed-cost figure if finance reports them separately. The point is consistency. A model that includes a tax in one supplier comparison and excludes it in another does not show a real price difference.

Which costs sit inside the FOB price, and which do not?

The FOB price is the garment cost up to the named shipping point under the agreed sale term. It is not a door price. For costing purposes, treat it as the product-price base and list every later cost line outside it unless the quotation or booking record expressly says otherwise.

The garment price itself normally reflects the commercial build-up agreed for the style. Fabric, trims, garment work, treatment, packing and the assumptions behind the order can all affect it. A change in fabric weight, colour count, print method, packing or order quantity can move the FOB price before the logistics model begins. Fabric minimums are one common reason: a mill may set a minimum that changes the material economics of a small colour run.

Usually part of the garment quote	Usually modelled after the garment quote	Question to settle before comparison
Garment construction and agreed materials	International freight	What sale term is printed on each quote?
Approved trims, labels and packing specification	Cargo insurance, if purchased separately	Is cover included, optional or buyer-arranged?
Supplier-side handling included by the stated term	Import duty, tax and clearance	Which party is budgeting the destination charges?
Order-specific production assumptions	Broker, port, delivery and receiving charges	Are fixed charges allocated on the same basis?

Do not use a supplier price as a proxy for the material and logistics assumptions behind it. If one quote uses a lighter fabric, a different folding method or a fuller container, it may be lower for a reason that will matter after the order is placed. A costing sheet works best when it records the description of the garment beside the price.

How do you build a landed-cost model from an FOB quote?

Build the model in two passes. First, calculate the shipment total from confirmed quotations and likely current charges. Then allocate every shipment and entry charge across the units using one stated rule. This shows both the cash exposure of the shipment and the cost per garment used for range planning.

Use actual units shipped, not just units ordered, in the final allocation. If a shipment is split, delayed, short or supplemented, the original allocation may no longer describe the goods received. That is why a working model needs a version for planning and a version for the final landed result.

Step	Input	Output to keep
1. Fix the product base	Style, colour, quantity, FOB unit price and sale term	Total product value and a clear quote basis
2. Price the movement	Freight quotation, consolidation plan, cargo cover and origin charges	Transport total with quotation date and assumptions
3. Estimate clearance	Commodity classification, customs-value basis and current broker guidance	Import and entry estimate, marked for re-checking
4. Add destination costs	Release, delivery, appointment and receiving requirements	Destination total and named receiving point
5. Allocate	Units, cartons, cubic volume or weight, as appropriate	Per-unit cost with the allocation method recorded
6. Test changes	Different fill, shipment split, mode or delivery point	Sensitivity view and the cost drivers behind it

A simple worksheet can be written as:

Delivered cost per unit = product price per unit + allocated origin cost + allocated international movement + allocated import and clearance + allocated destination movement + receiving cost per unit

The arithmetic is simple. The discipline lies in naming the input, its date, its owner and its basis. Put a source against each line: supplier quotation, forwarder estimate, broker estimate, warehouse tariff or internal receiving record. If a number is provisional, mark it. A clean provisional model is more useful than a precise-looking number that conceals an old freight quote.

How should freight and fixed charges be allocated?

Allocate freight and fixed charges on the measure that caused the charge. When freight is quoted by container or shipment, a per-unit allocation is useful for garment margin, but it should sit beside the shipment total. When freight is driven by volume or weight, allocating by units can make a bulky jacket look artificially cheap beside a light jersey top.

For one-style, one-colour orders, a simple unit allocation may be adequate. Mixed containers need a rule agreed before the costing comparison begins. Cubic volume, gross weight, carton count and units each produce a different result. None is automatically right; the method must reflect how the carrier, warehouse or commercial team is actually bearing the cost.

Shipment situation	Allocation often worth testing	Why it changes the result
One style in a full container	Units	The shipment is effectively one product programme
Several styles with similar pack-out	Units or cartons	The difference may be small, but record the chosen method
Mixed outerwear and lightweight tops	Cubic volume or cartons	The garments occupy very different space
Air freight on a mixed range	Chargeable weight	Carrier cost may follow weight and volume rules
Small consolidated shipment	Units plus a separate fixed-charge view	Entry and brokerage charges can dominate a small quantity

Do not hide a fixed charge inside a general freight line when reviewing options. Seeing it separately makes the commercial choice clearer. A buyer may accept a higher per-unit cost for a smaller shipment to protect a launch date, or consolidate to reduce cost when the calendar allows. The model should show the consequence of each choice without pretending there is one universally correct allocation.

Why does the Incoterm change the landed-cost calculation?

The named Incoterm changes the point at which costs and risks are allocated between seller and buyer. It is therefore part of the costing model, not a label to add after prices have been compared. ICC Incoterms rules are trade terms used in contracts for the sale and delivery of goods, designed to clarify the parties' tasks, costs and risks.

For a garment buyer, the practical action is to read the exact term and named place on each quotation, then map which cost lines still belong in the buyer's model. An EXW, FOB, CIF or DDP quotation may each look like a unit price, while covering a different part of the journey. Our Incoterms guide explains the commercial comparison in more detail.

For an EXW quote, identify collection, origin and export-side costs that remain outside the unit price. For FOB, map transport, import and destination costs. For CIF, check the destination, import and delivery lines that remain. For DDP, establish exactly what is included at the named destination, then include receiving, appointment or post-delivery work if it still belongs in the buyer's margin.

Compare offers only after the same destination and receiving point have been applied. A lower figure can be a sound commercial offer, but it cannot be assessed fairly if the other quote ends at a different point in the chain.

What can change the model after the order is placed?

The biggest changes usually come from a decision made upstream: a revised quantity, a fabric approval that moves a booking, a split shipment, a different pack-out or a change in delivery location. Costing and critical-path management should speak to each other. If the development team changes the product, logistics needs to know whether cartons, weight, volume or readiness date have changed.

Freight and import inputs are time-sensitive. Get current advice when the shipment is being planned, especially when classification, destination treatment or routing is uncertain. A buyer's customs broker and freight partner can validate the live inputs for the exact goods and entry. Do not reuse a previous order's import calculation simply because the garments look similar.

Change	What to revisit	Decision it supports
Quantity falls	Container fill, fixed-charge allocation and material exposure	Whether to consolidate, revise the range or accept a higher unit cost
Pack-out changes	Cartons, cubic volume, weight and delivery handling	Whether the freight basis still fits the product
Shipment splits	Each entry's fixed charges and destination delivery	Whether speed justifies the additional landed cost
Delivery point moves	Inland transport, appointments and receiving	Whether the quote still reaches the intended warehouse

The same approach applies to a full-package programme. Keep the product brief, cost assumptions, sample approvals and logistics plan joined up. A late change is easier to price when the team can see which earlier assumption it replaces.

How can a buyer pressure-test a landed-cost comparison?

Pressure-test the assumptions before treating the lowest result as the winner. Ask every supplier and logistics provider for the same product specification, quote basis, quantity, delivery point and timing assumption. Then compare the lines, not only the total.

Start with the product. Confirm fabric composition, construction, garment weight, packing, colourways and quantity. Confirm the sale term and named place. Then ask what is excluded from the quote and who will supply the import, broker and delivery inputs. This does not make the model slower. It prevents a pricing decision from being reopened after materials or transport have been committed.

A useful review asks four questions: Is this the same garment? Does every price end at the same point? Is each allocated cost tied to the actual shipment plan? Which inputs are estimates that need re-checking? The questions to ask before a sourcing agreement offer a wider framework for setting those responsibilities.

Short FAQ

What is the formula for landed cost?

Landed cost per unit is the product price per unit plus allocated origin, international movement, import, clearance and destination costs, plus any receiving cost that belongs in the product margin. Keep shipment totals alongside the per-unit result.

Is FOB the same as landed cost?

No. FOB is a quotation basis used before the destination-side cost stack has been added. The buyer still needs to model the charges from the named shipping point to the receiving point.

Should freight be allocated by units or cartons?

Use the measure that best reflects the charge. Units can work for one compact product programme. Cartons, cubic volume or chargeable weight can be more useful for mixed shipments.

How often should a landed-cost model be updated?

Update it when the product, quantity, shipment plan, route or delivery point changes, and re-check live transport and import inputs during shipment planning. Keep the final version with the receiving record.

The number to make the sourcing decision on

Choose between garment offers on a comparable delivered-cost model, not an isolated FOB number. The best model makes its assumptions visible, separates shipment totals from unit allocations and flags every input that still needs confirmation.

That gives the buyer a useful commercial decision: the cost of the approved garment, on the planned route, at the intended receiving point. It also makes later changes easier to explain, because the team can see exactly which product or logistics assumption moved the result.